It appears that a developing political scandal is threatening to destroy relations between Bulgaria and the Arab world and indeed with foreign investors in general, after authorities erroneously announced last week that Abu Dhabi was helping out financially in plans to build a new F1 circuit in the Balkan country.

Last week, the Bulgarian Economy Ministry press office stated that an economic co-operation agreement had been signed between Economy Minister Traicho Traikov and Sheikh Mohammed Abdul Jalil al Blouki, president of Abu Dhabi state-owned consortium Emirates Associated Business Group (EABG), to invest in the building of an F1 track at the former air base at Dobroslavtsi, around 15km from the Bulgarian capital of Sofia [see separate story - click here] and an initiative to which the country's NGOs are broadly opposed on economic grounds. Bulgarian authorities claimed that in exchange for them providing the land, EABG would provide the finances.

However, the EABG has bluntly denied ever having had any such intention, having only responded to the Bulgarian Prime Minister's invitation to meet to discuss the project out of courtesy and having made clear its lack of interest at the time. Moreover, the company professed itself so angry at the misleading nature of the information given out - arguing that it had never before encountered such a level of unprofessionalism - that it plans to cancel all of its investments in the country and advise all of its partners to do likewise.

An official statement asserted that the company is private rather than affiliated with the state, and that al Blouki is simply a businessman and not a Sheikh as the Bulgarian Economy Ministry had claimed, and had never presented himself as a representative of the Abu Dhabi government in meetings.

"We stressed on the point that F1 is a project that we will look at when we see that it is commercially viable for us as a private investment company," EABG CEO Raid Abu Hudra told Bulgarian news agency Sega, who revealed that when a mediator from the Bulgarian prime minister's office had raised the matter of investing in an F1 circuit in the country, 'we told him we would not be interested'. "We expressed interest maybe in the agricultural sector, and maybe other sectors if there are any.

"EABG expressed its concerns that the project is at very primary stages; [...] when we asked for the Socio Economic Feasibility (the least you do before you do a project of this kind) then we were told that nothing was done. We kept on saying that we are a private company based in Abu Dhabi doing some business around the world; we are not sheiks."

Bulgarian Foreign Affairs Minister Nikolay Mladenov has since admitted that he fears for future relations with Arab countries as a result of the international scandal, especially in the light of the fact that the country's greatest increase in exports over the last half-a-year has been with the Middle East.

"Bulgaria is leading an active policy in the Middle East, and I hope this F1 situation would not reflect on our relations with other Arab countries," he said. "I hope this situation will be settled very soon."

In a further twist, finally, it has been reported that EABG advisor Anwar Badwan - who was sent to Bulgaria at the weekend to try to resolve the embarrassing matter - has received 'a disgusting letter' and two e-mails from an Alex Tsakov attempting to blackmail him for EUR94 million 'to iron out the misunderstandings' and making threats against him and his family. The e-mails are believed to be part of a larger effort to sabotage all EABG dealings in Bulgaria, and are currently being investigated.